The new system will pay a flat rate of housing benefit to private tenants set at the rate the local rent officer believes is medium for that area. Tenants paying lower rents will be allowed to keep the difference. Those with higher rents will have to make up the shortfall from their own pocket.
Next month, 10 local authorities will be chosen to pilot the standard local housing allowance scheme in England, Wales and Scotland in high- and low-demand areas and urban and rural councils, including in London. The pathfinders will run from next year, after secondary legislation has been introduced, until 2005.
Soon after that, the government hopes to roll out the system across the country. The scheme could be introduced to registered social landlords in pilot areas in 2006, and will be used more widely in the social housing sector once rent restructuring is complete in 2010.
Andrew Smith, secretary of state for work and pensions, said that contrary to experts' fears, the system was not designed to reduce the country's housing benefit bill.
He said: "It's manifestly not cost-driven. There's a £20m cost to the operation – we are doing it in a way that there aren't losers and there will be a number of gainers. It will bring about savings through a more efficient system and put power in the hands of tenants."
One benefit expert estimated that two-thirds of people experiencing shortfalls under the old system would have their rent covered by the new scheme.
But critics said a lack of choice in high-demand areas would mean some tenants could not shop around for cheaper accommodation. They added that rent levels set by rent officers could sometimes be less than the rents available in an area, so tenants would lose out.
Smith said the new system would cut back on bureaucracy as benefits will no longer be reassessed every year. There will be a fast-track scheme for former claimants who lose their jobs within 12 weeks of coming off benefit.
Under the current system, landlords of benefit tenants are paid the lowest of either the actual rent, the rate the rent officer has set for the area or the claimed rent, which is based on the size and standard of property thought necessary for the tenant.
A 1999 survey found 70% of private tenants experienced shortfalls under the current system, which they made up from their own income.
standard local housing allowance scheme
- 10 councils will pilot the scheme
- Flat rate of housing benefit will be paid directly to tenants
- Rates will be set by rent officers as the average rent for that area
- Tenants whose rent is lower than the flat rate will be able to keep the difference, but those with higher rents will have to pay the shortfall
- Rent will be paid to landlords of vulnerable tenants and tenants in arrears
Andy Baker
“It seems good in theory but the problem with a rising housing market is rented properties are in short supply here and rent is going up. People on low incomes won’t have properties to shop around with that are the same as their rent allowance. I don’t think they will be able to pocket the difference, I think a lot will have a shortfall. It depends at what level they set the rent threshold.”
Danny Friedman
“If, in several years, there was a pilot in the registered social landlord sector, it would change the relationship between the landlord and the tenant. A lot of safeguards against arrears would have to be put in place and systems would have to change. Tenants should be able to choose whether they have their rent paid direct or out of their own pocket.”
Sam Lister
“Most of the ideas we do not object to in principle. Paying rent directly to tenants would be a good idea, but it will depend on how you implement the policy. Housing benefit assessments will need to be accurate and consistent. If it takes 26 weeks for a claim to be assessed and the tenant gets a cheque of £2000 for arrears and runs off with it, then that would be a problem.”
Source
Housing Today
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